PENTAGON SCRAPS $57 BILLION ORDER FOR ATTACK PLANE

By ERIC SCHMITT, Special to The New York Times

Published: January 8, 1991

WASHINGTON, Jan. 7—
Defense Secretary Dick Cheney today canceled plans to build a new Navy attack plane, the largest weapons program ever terminated by the Pentagon.

The decision, which surprised military analysts, was announced in a Pentagon statement that said the builders of the $57 billion A-12 warplane program had defaulted on the program by failing to "design, develop, fabricate, assemble and test the A-12 aircraft within the contract schedule."

The contractors are the McDonnell Douglas Corporation and the General Dynamics Corporation, both based in St. Louis. Both denied that they defaulted on the contract and said they would challenge the ruling. Moments after the announcement, General Dynamics said it would begin laying off 4,000 workers in Fort Worth and Tulsa, Okla. McDonnell Douglas said as many as 5,000 workers could lose their jobs in the next few days. [ Page A18. ] Signal to the Military

Mr. Cheney's decision to cancel the radar-evading stealth warplane, the Navy's top-priority aircraft, sent a strong signal to both the military industry and to the armed services that he would tolerate neither delays and cost overruns nor attempts to conceal such problems. [ Page A18. ]

"This program cannot be sustained unless I ask Congress for more money and bail the contractors out," Mr. Cheney said in a statement. "But I have made the decision that I will not do that. No one can tell me exactly how much more it will cost to keep this program going.

"I do not believe a bailout is in the national interest. If we cannot spend the taxpayers' money wisely, we will not spend it." No Planes Have Been Built

The A-12, or Avenger, is 18 months behind schedule and more than $2.7 billion over cost, by Pentagon projections. The contractors have made designs and built some parts, but have produced no actual aircraft.

Pete Williams, the Pentagon spokesman, told reporters at a briefing today that under the contract, McDonnell Douglas and General Dynamics had agreed to develop eight prototype planes at a maximum cost of $4.8 billion, but added that the Pentagon now estimated that that cost would rise to more than $7.5 billion if the project proceeded. Mr. Williams said the Pentagon had paid about $1.2 billion to the contractors. Contractors had incurred costs beyond the $4.8 billion contract before even building the plane and were seeking to have the Defense Department reimburse them.

After developing the prototypes, the companies were to build six planes at a total cost of no more than $1.2 billion, along with parts for eight others at a total of $200 million.

On Dec. 14, Mr. Cheney had ordered the Navy to prove why the Pentagon should not terminate the A-12 program. In a three-hour meeting on Saturday, the Navy urged him to proceed with the program by buying fewer planes over a longer period and absorbing some of the contractors' costs.

Military analysts had said it was highly unlikely that Mr. Cheney would go so far as to cancel a program the Navy said was so vital to its aviation programs into the 21st century. But the Secretary was clearly not persuaded by the Navy's arguments.

Today he said the stealth technology would still be needed "if attack aircraft are to elude advanced fighters and surface-to-air missiles in the future."

"My decision against a bailout is solely in response to the problems with the current program," his statement said. "We will still need to develop a next-generation strike airplane for our aircraft carrier force to replace the aging A-6 aircraft." Now, to Consider Alternatives

The A-6, the Intruder, first flew in Vietnam and was used in the United States' attack on Libya in April 1986. The A-12, a faster, radar-evading version, would also have been based on carriers and would have been used to attack targets on the ground with rockets and bombs.

Mr. Williams said the Defense Department would "be considering alternatives to the A-12 program to meet future needs for carrier aircraft" but added that no decisions had been made. He said any replacement would have the same all-weather, night-fighting and radar-evading abilities as the A-12.

The Navy had originally planned to buy 620 A-12's to replace the A-6. The first A-12's were to have been delivered to the Navy in February 1992, and the plane would have completely replaced the A-6 by the late 1990's.

Three years ago, the Pentagon decided against buying a modernized version of the A-6. The Grumman Corporation, which builds the plane, said it would take at least three years to gear up its production line and network of suppliers. Contract Is Termed Flawed

In a statement today, General Dynamics called Mr. Cheney's ruling "extremely disappointing, especially in light of the substantial progress that had been made on this highly advanced carrier-based aircraft."

The contractors said the development contract, signed in January 1988, was flawed, and they blamed the Pentagon for the problems. On Dec. 31 they filed a claim against the Pentagon for $1.4 billion.

A spokesman for General Dynamics, Alvin Spivak, said the A-12's development problems had "been the direct result of Government insistence on a fixed-price-type contract for a program that is on the cutting edge of technology."